Japanese Gaming History: The First Console Wars

In the last article, we introduced Nintendo and talked about their stranglehold on the gaming market, and how Nintendo’s iron-fisted policies rubbed many developers and distributors the wrong way. We will see how these policies, originally meant to protect Nintendo and the home gaming industry, would go on to nearly topple it.
Please note: The console war mostly takes place in America, so I will mainly focus there.

Birth of Sega

Sega had its roots in Hawaii where it was named Service Games in 1940. In 1951, the company founders moved the company to Tokyo in order to develop coin-operated games and jukeboxes for military bases throughout the country. In 1954, an American US Air Force officer, David Rosen, began to establish a business of 2-minute photo booths. These became a major hit, due to the fact that developing a picture normally was very expensive. He soon began to import coin-operated games. In 1965, Rosen’s company and Service Games merged. They renamed the company Sega (short for SErvice GAmes). Sega continually grew bigger and bigger and managed to scrape its way through the gaming crash. In 1982, a group of investors including David Rosen and Hayao Nakayama bought out Sega. Hayao Nakayama was a rather eccentric, but brilliant, businessman. Nakayama would become the new CEO, and decided to enter into competition with Nintendo in the home console market.

The Master System

The Master System was technologically superior to the NES (Nintendo Entertainment System or Famicom in Japan), but it failed to secure a solid grip in the North American market. But, it sold very well in Europe and Brazil. Despite this success, both Nintendo and Sega focused on the massive North American market.

Sega of America

Sega worked with the toy maker Tonka to distribute the Master System. But despite Tonka’s success in selling toys, they did not understand how to market a game system. After a miserable showing in America, Nakayama decided to replace the leadership of Sega of America before bringing their new console the Sega Genesis to American shores. Tom Kalinske was previously an executive for the toy maker Matel. There he was put in charge of the floundering Barbie line of toys. Many people thought that the Barbie line was dead. But Kalinske managed to bring the line back to life by making many separate lines, Malibu Barbie, Shopping Barbie, Office Barbie and many more. Due to company politics, Kalinske was ousted from his position. He was soon apporached by Nakayama who took him to Japan to the Sega development labs where Kalinske saw the future of entertainment. He agreed to take over Sega of America. His goal: topple Nintendo of America

The First Shots

Kalinske’s plan for his coming war was to attack Nintendo’s weakest flank, older kids. His plan was to make Sega cool. Nintendo’s marketing had always focused on younger children and families. But the generation that had grown up with the Nintendo now were older, and their tastes were changing. Kalinske first needed a new mascot. Sega developers working on the Genesis’ flagship game sent him a design for their main character (the design was selected in a raffle by the developers), a blue hedgehog named Mr. Needlenose. He wore a leather jacket, carried a huge guitar, had fangs, and was part of a band with his big boobed human girlfriend, Madonna.

Kalinske and his staff fought bitterly with the developers to get the design and name changed. This new game was mostly intended for the North American market, and Kalinske argued that this character would not sell in America. The developers argued that, as the developers, they had final say on the design.

But, Nakayama came down on Kalinske’s side, and the design was changed to the Sonic the Hedgehog we know today. When Kalinske saw the first demos of the Sonic the Hedgehog game, he knew they had a hit. Due to Nintendo’s policies, many developers, marketers, and stores were happy to side with Sega, but they were initially hesitant. They didn’t know if this company would be a big seller, but when Sonic the Hedgehog was released it was a huge hit. Kalinske made a very controversial decision, he bundled Sonic the Hedgehog with the Genesis. Genesis began to sell very well.

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Kalinske continued to break with tradition and started to make attack ads against Nintendo. Negative ads were a taboo in Japan, and it made Sega of Japan’s corporate heads very uncomfortable. But, they were incredibly effective. I was a child during all this, and I can still remember clearly the Sega ads. I can not remember a single Nintendo add. Not only were the ads negative, they were very clever and funny. One of the most famous Sega ads was the race car one (http://youtu.be/rDpTLY6dpXQ). Nintendo’s initial reaction to these negative ads were to not respond. Initially, Nintendo did not think that Sega would prove to be a serious competitor. In conferences and press events, Nintendo refused to even accept that they had any competition. They continued on as if nothing was happening. Nintendo’s neglect seemed to prove that Sega’s advertising was correct. And slowly, but surely Sega would start eating up the North American market share. But, Nintendo had no intention to go quietly into the night. They would soon respond in kind…

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